Russia does not need to continue grain export ban

Russia is expected to announce a 6-7 million metric ton surplus of grain for the 2011-12 season, making it unnecessary to maintain its ban on exporting grain, says the US Department of Agriculture's Moscow attache.

The attache said in a report that political considerations, including the lobbying of powerful livestock producers, means the Kremlin may keep the embargo in order to cap domestic grain prices.

"From an economist's point of view the continuation of the grain ban is unjustified," said the report. "Unfortunately, Russian grain policy does not always follow the logic of economics."

Russia's government imposed a ban on grain exports last year after the worst drought to hit the country in more than a century slashed the country's harvest by a third to around 63 million tons.

But now the prospects of a larger crop in 2011-12 and plummeting internal prices have buoyed hopes that the Black Sea producer will reenter the markets again this year. The USDA gave an optimistic estimate last week that Russia will export 10 million tons during the season.

Russian officials are due to meet at the end of this month to debate whether to keep or lift the ban. The issue has become particularly pressing as sustained dryness in Europe and the US is already damaging crop development and some forecasters fear supplies may not be enough to replenish low exporter stocks.

Producer agencies are also urging the Kremlin to release supplies as up to 8 million tons of grain is estimated to be sitting in elevators in the south, taking up valuable storage space for the coming harvest.

"If the ban remains in place some grain may rot in the fields as silos are already near capacity," said the report.